Items:

According to the company's quarterly report for 2023, Q3 achieved a revenue of 447 million yuan (- 0.59%) in a single quarter, a net profit of 40 million yuan (- 58.40%), and a net profit of 48 million yuan (- 47.60%).

Peace viewpoint:

Q3 income remained stable, gross profit margin and expense rate both declined

Q3 achieved an income of 447 million yuan in a single quarter, which remained basically stable compared with the same period last year. Taking into account the price reductions caused by competition in domestic and foreign blocks and CDMO front-end products (such as RSM) in the first half of the year, we estimate that Q3 has increased in terms of shipments.

In the first three quarters, the company achieved a total income of 1.291 billion yuan (+ 9.01%), of which the block business realized revenue of 269 million yuan, which was basically the same as that of the same period last year, and the income of CDMO business was 997 million yuan (+ 9.62%).

Q3 single-quarter comprehensive gross profit margin of 41.37%, year-on-year-5.20pct, month-on-month-1.01pct. Factory capacity utilization is not satisfactory and the price reduction of superimposed products has a negative impact on gross profit margin. At the same time, the company has alleviated the impact of price reduction to a certain extent by optimizing personnel structure and a number of cost reduction measures. In terms of expense rate, the company's sales, management and R & D expense rates are 3.14% (+ 0.64pct), 10.70% (- 3.08pct) and 8.95% (- 2.02pct) respectively, achieving better cost control under adverse external environment.

Improve internal ability, strengthen sales ability and product coverage

The founding team of the company is good at pharmaceutical and synthetic technology, but relatively weak in sales. After listing, the company adds Becton Dickinson & Co personnel to strengthen the sales and promotion ability. In the past two years, the company has further improved its sales, introducing full-time personnel, strengthening the contact between business departments and customers, and promoting the brand through websites and emerging media. In the technical field that we are good at, the company conforms to the market demand, develops new pharmaceutical hot fields such as ADC, polypeptide, small nucleic acid, etc., and expands product coverage. Over time, the effects of these internal capacity-building are expected to be gradually reflected in orders and performance.

Maintain the "recommended" rating: based on the expected improvement of the domestic and foreign macro environment and pharmaceutical investment and financing situation, adjust the EPS forecast for 2023-2025 to 1.04,1.28,1.89 yuan (the original 1.24,1.66,2.45 yuan). Under the environment of insufficient demand, the operating leverage of the company affects the release of short-term profits. It is expected that the performance of the company can be repaired quickly and maintain the "recommended" rating after the improvement of the pharmaceutical investment and financing environment.

Risk tips: 1) the predictability of the company's business is relatively weak, and if the actual business occurs at a different pace from the company's forecast, there may be a mismatch between production capacity and demand; 2) if the effect of business development is not as good as expected, it may affect the development of the company. 3) if customers no longer renew their products due to price factors, their performance may be affected. 4) if the management concepts and methods of the management can not be changed in time with the development stage of the company, it may affect the development of the company.